08.21.08

Investment Grade
AAA: the best quality borrowers, reliable and stable (many of them governments)
AA: quality borrowers, a bit higher risk than AAA
A: economic situation can affect finance
BBB: medium class borrowers, which are satisfactory at the moment
Non-Investment Grade (also known as junk bonds)
BB: more prone to changes in the economy
B: financial situation varies noticeably
CCC: currently vulnerable and dependent on favorable economic conditions to meet its commitments
CC: highly vulnerable, very speculative bonds
C: highly vulnerable, perhaps in bankruptcy or in arrears but still continuing to pay out on obligations
CI: past due on interest
R: under regulatory supervision due to its financial situation
SD: has selectively defaulted on some obligations
D: has defaulted on obligations and S&P believes that it will generally default on most or all obligations
NR: not rated


Under US accounting rules, asset must be classified into:

· Level 1 (Mark-To-Market) - liquid assets or instruments that are actively traded.

· Level 2 (Mark-To-Model) - instruments that cannot be priced based on trade prices but are valued using observable inputs.

· Level 3 (Mark-To-Make Believe or Mark-to-Myself) - the asset or liability cannot be priced using observable inputs and requires the use of modeling techniques and substantially subjective assumptions.

• category: Market videos
• submited by: R_Shiller
• submited at: 23:17, 10th October 2008

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